Peter Thiel’s $5 Billion Evil Genius

Peter Thiel Speaks In Beijing.
(Photo by Visual China Group via Getty Images)
Theodore Schleifer
June 29, 2021

Earlier this morning, as I read ProPublica’s latest tome on how the wealthiest Americans exploit every loophole in the byzantine tax code, I couldn’t help but think that Peter Thiel must have been beaming.

Thiel, after all, is exposed in the piece for turning a retirement account into a financial gusher that kept his money away from the IRS. On some level, this wasn’t news. As far back as 2009, Gawker reported that Thiel’s Facebook shares were held in his Roth IRA. But the news brand, which Thiel later exsanguinated, suggested the holdings amounted then to about $100 million. According to ProPublica, it’s now more like $5 billion. And Thiel, who views the American tax regime as confiscatory, has to see this ability to outsmart the eggheaded bureaucrats as a form of patriotism, a way of beating a system that he thinks is stupid to begin with. As concerned as he is about the privacy violation, there’s probably a part of Thiel that wishes someone at the IRS had leaked this years ago.

The ProPublica investigations are praiseworthy for the extensive documentation of what is generally common knowledge in the Tribeca-Menlo Park-Holmby Hills vortex: The uber-rich capitalize on well-intentioned tax loopholes meant for middle-class people, which is how Jeff Bezos could claim a $4,000 child tax credit when he had a net worth of $18 billion. They use charitable deductions meant to encourage mom-and-pop philanthropy to make themselves look like paupers. And tax policy meant to create a comfortable nest egg for working people can be twisted into a tax shelter that allows billionaires like Thiel to operate in their own stratosphere.

What has surprised me, however, has been the scale. Perhaps we weren’t cynical enough about the myriad ways the system is abused. A $100 million tax-free account? Nope, the problem is 50 times worse.

The Thiel story also serves as another data point to suggest that our wealth estimates for the uber-rich may be way off. Forbes and Bloomberg take the best stabs in the business at estimating their fortunes, but the figures are heavily dependent on public-company holdings or the billionaire’s willing participation. But it has gotten harder—the line between billionaire and asset manager has thinned as family offices have gotten more and more sophisticated. I worry that we don’t have our hands around the true scale of inequality.

I’ve been thinking a lot about that recently, in part because of another billionaire named in the massive trove of tax documents obtained by ProPublica: Warren Buffett, who has also paid a pittance in federal income taxes. While Thiel has to be raking in locker-room high-fives from his libertarian buddies, Buffett’s recent public comments emit a more red-faced vibe. Not that Buffett has been caught in any lies—he’s long campaigned for changes to the system that require him to pay more—but the disclosures reveal that, in practice, he has more in common with his billionaire brethren then he does with his political allies, paying the taxes he owes and not a penny more. He hews more to the gospel of the wealth management industry than the gospel of the Democratic Party.

Here’s another reminder that Buffett isn’t that different: On Wednesday, he announced that he’d donated another $4 billion to charity, proudly observing the “milestone” that he had now contributed over half of his Berkshire Hathaway shares. Left unstated, however, is that he is now worth (with the earlier caveat) twice as much money as he was 15 years ago. Even Warren Buffett—one of the most generous philanthropists of his era—cannot give away money quickly enough to actually make a dent in his net worth.

A side note: Buffett also dropped the news that he’d be stepping down as a trustee of the Gates Foundation amid the messy divorce between the foundation’s namesakes. It is not immediately clear to me how the resignation of Buffett—the sole person on the three-member board who is ostensibly neutral by virtue of not being named Bill or Melinda Gates—helps reform an institution that clearly is in need of a governance overhaul. This is surely just a piece of a broader set of reforms coming next month, but I would’ve thought those changes would make Buffett, even at 90, more involved, not less.

Anyway, my big takeaway is that it matters little whether a billionaire is sheepish or boastful about their personal finances being splayed out for the world to see. They play the same game. Thiel and Buffett are both serious intellectuals, but couldn’t be more different in livelihood, demeanor, or politics. I’d love to see them debate the good life, the role of philanthropy, and yes, American tax policy. But in practice, Buffett and Thiel have more in common with one another than either would care to admit.